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Ben van Berkel (inset) and the foundation of his project at Five Franklin Place.

How to solve the problem of slotting black and bendyFive Franklin Place
into a neighborhood of 100-plus year old buildings so that everything
stands tall and secure? For Dutch architect Ben van Berkel and the gang
at UNStudio, the answer was to clear out the guts of a couple of old
buildings, then weave about 637 miles of black and bendy rebar ribbons
into three feet of foundation. Finally, cover it all with lots of concrete. In
this neck of the woods it's better to be safe than sorry. Ben's made a
strong start on what's needed to get this big basket of blingification rising
above Tribeca. Now, it's time to pour another one.

The first layer of rebar set within the excavated shell of 369 - 371 Broadway.

Detail of the first of many layers of rebar where it meets an old wall next door.

Rendering of the completed Five Franklin Place, showing both front (l.) and rear (r.)

Narrow Franklin Place as it is seen today, looking south towards Franklin Street.

Yesterday we picked up some chatter on the CurbedDar regarding Five Franklin Place, Dutch architect Ben van Berkel's big, black and bendy New York City debut. Specifically we heard some rumors about the 20-story Tribecaish project's financing. Then, we noticed that the building's listings appear to have vanished from the web, and the project is no longer mentioned on the Corcoran Sunshine Marketing Group website. Concerned about these matters (the Post noted last week that only around 8 apartments in the 55-unit building have sold since May), we asked Leo Tsimmer of Five Franklin developer Sleepy Hudson to comment. And he did!

When asked about the state of the project, Tsimmer told us:

We are changing to Sales Gallery operations to "by appointment only," which will allow for significant economy in staffing costs, and ultimately let's us concentrate the attention on what is important, I.e. Construction. All other non-core aspects of the development such as advertising are also being downshifted. Trim and lean is the name of the game. Our financial troubles are no more than of the other developers who continue construction/development with their own funds in this market environment. Last week we finishied pouring the 2nd floor, and construction continues.

And there you have it. As for the sales and marketing situation, Tsimmer says Five Franklin has retained one person from the original sales team and two in-house employees. He adds, "I am in talks with Corcoran right now about the switch. It involves discussing new candidates and they expressely told me they "would love to continue being involved in this great project."

The Corcoran Sunshine Marketing Group has filed a lawsuit in New York State Supreme Court alleging that the developer of Tribeca's Five Franklin Place condo owes the brokerage more than $500,000.

In the summons addressed to the developer, Corcoran said it terminated its exclusive sales agreement with Franklin Place last October, after the developer of the unfinished condo failed to pay more than $100,000 in marketing expenses. Corcoran argued that based on its initial agreement with the developer, it was entitled to a $500,000 termination fee if it ended its sales agreement with Franklin Place.

The lawsuit between Corcoran and Franklin Place LLC, which was filed in late January but is being reported for the first time by The Real Deal, is one of several recent suits between brokerages and developers. Real estate lawyers and brokers say they expect brokerage-developer litigation to mushroom as the market continues to trend downward and developers find themselves with less money for marketing expenses while condo plans are scaled back.

Allison Scollar, who heads up the real estate division at the law firm Guzov Ofsink, said she is currently working on a couple of cases between New York City developers and brokers, but she declined to name the parties involved.

"From the brokerage point of view, they give a lot of added value to a project," said Scollar. "The other side of the coin is, if the broker and developer begin arguing, it is the developer's product, and they have the ultimate say."

Lawsuits are, of course, plentiful during downturns. In the early 1990s, there was also an increase in real estate litigation, said Scott Mollen, a partner at the firm Herrick Feinstein.

"There was an uptick in litigation between everybody," said Mollen. "Lenders and sponsors, sponsors and brokers, purchasers and sponsors, sponsors and the attorney general, and between purchasers and brokers."

As for Five Franklin, the developer is not taking Corcoran Sunshine's allegations lying down. Last month Franklin Place LLC's attorney answered the summons from Corcoran, denying nearly all of the brokerage's allegations. The counterclaim, which was also filed in state Supreme Court, alleges that Corcoran Sunshine owes the developer a minimum of $8 million for damages, plus costs and fees.

It says the Corcoran Sunshine Marketing Group "failed to apprise defendant during 2008 that the market for residential condominiums in New York City, such as those contemplated for the Project, was trending downward at a pace that should have counseled a reduction in the advertising, marketing and showroom expenses being incurred by defendant … Instead, and knowing of the downward trend in the market, plaintiff actually encouraged defendant to increase, or at least maintain, its advertising, marketing and showroom expenses."

Errol Margolin, a partner at the law firm Margolin & Pierce and the lawyer representing Corcoran Sunshine, disputed the developer's claim.

"Their counterclaim is baseless," Margolin told The Real Deal. "Franklin Place consistently ran a big balance [that] they only paid part of, and they were in such breach of their agreement that Corcoran had to terminate their association with them."

Five Franklin may be facing other troubles as well. In December, the real estate Web site Curbed reported that the project was in default on its acquisition loan and is currently being marketed for sale.

Representatives from Corcoran; Franklin Place LLC's principal, Leo Tsimmer; and Tsimmer's lawyer in the suit, Jeffrey Dannenberg, did not return calls for comment on the litigation. According to Mollen from Herrick Feinstein, who is not involved in the Five Franklin lawsuit, the "termination fee" like the one sought by Corcoran is frequently built into brokerage-developer agreements.

"If the sponsor wants the right to terminate the brokerage firm without cause, then it is not uncommon that the broker will bargain for a provision in the brokerage agreement that provides for a termination fee," said Mollen. "Of course, whether a termination is 'for cause' or 'without cause' may be a disputed issue."

One of the other issues at the crux of the Corcoran-Franklin Place case — the allegation that Franklin Place LLC did not reimburse Corcoran fully or in an expedient fashion for marketing outlays — also applies to other brokerage-developer disputes. It is, for example, also the central issue in two recent lawsuits that Halstead Property has brought against developers.

As The Real Deal reported in late February, Halstead filed a suit against the developer of the Upper West Side condo conversion Park Columbus, Yair Levy, alleging that he owed the brokerage roughly $75,000 for outstanding expenses that include "advertising, supplies, printing and the like for the condominium project."

Halstead also filed a suit about a month ago against North Manhattan Construction, the developer of the half-rental/half-condo project Bridges NYC in East Harlem.

The cases, according to the Neal Schwarzfeld, a partner at Penn, Proefriedt, Schwarzfeld and Schwarz who is representing Halstead, are "of a very similar vintage" in that they both involve Halstead seeking to recoup money for advertising expenses.

Stephen Kliegerman, the executive director of development marketing at Halstead, noted that when brokerages and developers sign sales agreements, the developer typically agrees to reimburse out-of-pocket expenses incurred by the brokerage in service of marketing a building.
Levy and the principal for North Manhattan Construction, Michael Waldman, did not return phone calls for comment on the suits.

Meanwhile, another aspect of the Corcoran-Franklin Place lawsuit is more applicable than ever when it comes to battles between brokerages and developers.

In Corcoran Sunshine's suit, the brokerage alleges it is entitled to commissions on three units it put into contract at Five Franklin, if and when the sales close, despite the fact that the brokerage is no longer the building's sales agent.

Lawsuits over commissions owed when brokerages and developers part ways are not uncommon. Last summer, for example, the Corcoran Group brought a lawsuit against the developer of a seven-unit condo at 526 East 80th Street, 538 Emmut Properties LLC.

The suit hinged on the fact that a Corcoran broker brought a unit in the building into contract before the brokerage and developer terminated their exclusive agreement. The unit's would-be buyer then rescinded the offer for the unit and it never closed.

Corcoran argued that it was still owed a commission even though the unit didn't close, but the court eventually dismissed the brokerage's allegations.
Mollen, who wrote a case study of the lawsuit in the New York Law Journal, said the outcome of these types of cases "will be based on the precise language."

"This is especially so when the courts are dealing with sophisticated parties who were represented by experienced counsel," he said.

Corcoran Sunshine's attorney, Margolin, noted that such cases often hinge on whether it can be proven that "the developer caused the condo not to close … If the developer refuses to close but a broker produced a buyer, the broker should be entitled to a commission."

They should be rising now—shiny, majestic and ready to punch the sky. But behind the construction fences of Lower Manhattan, as around the city, luxurious condominiums and five-star hotels-to-be are no more than bare concrete foundations and dirt lots. As financing vaporized last fall, so too did the dreams of developers and schemes of famous architects—at least for now. According to the Department of Buildings, there are 446 stalled construction projects in the city, so many that the agency created a special stalled building task force to inspect dormant sites and make sure that they are safe. The DOB counts eight stalled sites below Canal Street. Not many, but several are massive in scope. The Trib peeked over the fences of six of those projects. Here’s what we could see.

5 FRANKLIN PL. THE LOTTERY MIGHT BE A BETTER BET

ts 20 stories uniquely wrapped in glass and black aluminum bands, 5 Franklin Place was meant to open this year. But work on the 55-apartment condominium, designed by Dutch architect Ben Van Berkel, came to a halt as financing dried up at floor five. “It doesn’t matter what number you’re coming to [banks] with, whether it’s 10 million or 100 million, they just say they’re not interested,” says David Kislin, whose firm, Sleepy Hudson, was developing the project.

The developer defaulted on its land acquisition loan, and the bank has the property on the market for $19 million. But Kislin says so far there has been no interest. “It’s the lenders’ option to try to sell it at the prevailing market rate and right now there’s no buyers for land.” He sees the credit market softening next year. In the meantime, “I’ll play Mega Millions this week and if I hit I’ll finance this thing.”

The white (painted) brick building just to the south (on the NW corner of Broadway & Franklin at 365 Broadway) is still behind construction netting. It's been stripped down to original red brick and had 2 floors of basic brick and windows added up top and looks like it's sort of nearly done.

Real estate and investment advisory firm William Procida, Inc. has been named the advisor on a $28.25 million mortgage loan for an unnamed lender at Five Franklin Place, a 55-unit condominium at 369-371 Broadway in Tribeca developed by Sleepy Hudson LLC. The firm's head, Billy Procida, said that his company often becomes involved in "complicated transactions" such as this, providing value analysis and asset management on loans. "I'm a bankruptcy specialist, I'm a contractor... my specialty is basically getting money back for people," Procida said.

Comment on that article:

From: Anonymous

To TRD editors: Please post news. If you are going to start a story, please expound so as to not seem so tabloid like. I will offer some assistance. Procida is advising for Harbinger Capital, Philip Falcone's hedge fund. The now defunct real estate group bought the loan from Canyon a month before Lehman's collapse and have been sitting on it since the group was disbanded in Dec. 2008. The borrowers, David Kislin and Leo Tsimmer, have retained the ex-CS lending gurus now at Cantor Fitz to raise equity and debt to repurchase their loan and complete the project. Having spoken to Procida about the project in January, I am left curious as to why the four month delay in self-promotion. To say his understanding of the project was minimal would be generous.